09 - Laserfiche WebLink

BACKGROUND California Government Code Section 53646 provides for the City Council to adopt an annual investment policy. The proposed investment policy for FY 2023/24 and the adopting resolution are attached. DISCUSSION Aside from being legally required, an investment policy is important because it provides the framework for a prudent investment program and helps fulfill the City's fiduciary responsibilities. Specifically, a formal investment policy is necessary to identify investment objectives, define risk tolerance, assign responsibility, and establish control over the investment process. Safekeeping of cash and investments is one of the most important responsibilities of the City Council, City Manager, and the Director of Finance. A well- developed investment policy serves as a working document that directs the investment activities of the staff and protects the government from potential losses stemming from unsuitable investment practices. The recommended changes result from a comprehensive review of the City's current Investment Policy and Guidelines. These updates ensure that the policy satisfies all the requirements of the California Government Section Code, follows the California Debt and Investment Advisory Commission's Local Agency Investment Guidelines, and reflects the widely accepted best practices that allow the City to better mitigate risk. Investment Strategy The overall strategy of the investment program is to earn a market rate of return, while maintaining sufficient liquidity to meet operating cash requirements. This is accomplished by maintaining a portfolio of allowable investment instruments that have acceptable credit quality standards with maturities matching expected cash needs. The City does not actively trade securities in the open market. Instead, the City utilizes a conservative approach, commonly described as "buy and hold", which means that once a security is purchased, it is held until maturity unless market conditions warrant selling of the security. Policy Update Highlights Below are some of the key updates included in the proposed Investment Policy and Guidelines: • Pooling of Funds: The City does not maintain separate portfolios for all its funds but rather pools all its cash and apportions assets and earnings accordingly. The language reflecting this practice has been added for clarity. • Delegation of Authority: This section is amended to explicitly state that the Director of Finance will be responsible for all transactions undertaken and will establish procedures to regulate all investment activity. Moreover, the language allowing delegation of authority to an investment adviser has been updated to simply state that the City may engage a professional investment adviser, but the authority may not be delegated away from City staff. • Authorized Financial Dealers and Institutions: This section has been updated to require the City to utilize competitive bidding on the purchase of securities in order to ensure efficient execution of trades. Additionally, a list of the types of financial Page 2 of 5